Consumers currently spend 0.46 percent of their income on health insurance, according to the Bureau of Labor Statistics. Under the Affordable Care Act, those premiums are set to skyrocket. Consumers can now spend 9.5 percent of their income on premiums using the law's definition of affordable.
Higher premiums are a source of sticker shock for many consumers and those premiums are now due. In order to pay those bills, consumers will need to shift spending. A large increase in mandatory spending inevitably causes a decrease in discretionary spending.
In the past, many consumers spent money on healthcare rather than health insurance. When deductibles are added to premiums, many consumers will not have enough money to fund their healthcare. They will also not have enough money to fund their discretionary spending.
Insurance premiums will be a drag on economic growth in 2014 for individuals who bought Obamacare policies. Small business owners are facing higher premiums and uncertainty in the coming year and this will prevent them from hiring or making new investments in their business.
Faced with unaffordable premiums, many consumers may decide to forgo insurance and pay the small penalty, if the government decides to enforce the penalty. No one seems to know which parts of the law will be enforced, as the administration reacts to each new crisis with a new rule or request for insurers to go beyond the requirements of the health insurance policies the government approved for sale.
Years ago, surges in oil prices would tip the economy into recession as consumers struggled. This time, it looks like insurance premiums will strain family finances.
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